Economy Comparison of UK and Germany - Assignment Example

COMPARISON OF ECONOMY OF UK WITH GERMANY Germany and the United Kingdom are two developed European countries with economies with great potential of growth and development. Both the countries have developed benchmark economies over the past few years which a very few countries can compete with. Introduction Germany is considered to be Europe’s largest national economy and the fifth largest economy with respect to its Gross Domestic Product. (SGC) However, the United Kingdom’s economy is the third largest in the Europe and the sixth largest, following Germany, throughout the world.

German and UK economy with respect to Inflation With regards to inflation, the economy of the United Kingdom faced a few set backs in year 2008 where the Inflation rate reached 3.6% in that year. However, the UK’S inflation rate has deteriorated and has dropped to 0.4% and 0.8% in the years 2009 and 2010 respectively. (Economy Watch) Whereas, the inflation rate in Germany was an ideal 2.3% in the year 2008 and it partially increased in 2009 to 2.7%. This rate fell drastically in the year 2010 and reached a 0.

30% for consumer prices. (Index Mundi) Unemployment in Germany and the UK According to the National Statistics Office, it was declared that the unemployment rate had attained 6.3% in the fiscal year 2008 which showed that there were more than 2 Million people than were unemployed in the United Kingdom. This rate of unemployment is rising by the passing year and reached a 12 year high of 7.7% laying around 2.5 Million people unemployed. Since then, the inflation rate has stabilized and stood at 7.

8% during 2010. However, Germany’s unemployment rate was already around the peak of 7.1% during the year 2008 but the German economy has been able to control the unemployment rate due to which it has decreased to a 6.5% in the end of 2010. The Germans had experienced the highest unemployment rate of over 10.5% which was a 20 year high but have been ale to control the rate of the unemployment and reduce it to around 6.5% in the year 2010-11. Balance of Payment United Kingdom sustained a current account deficit of £8 Billion by the end of 2008 and also had a large trade deficit during the year, making it the third highest trade deficit throughout the world, while the deficit for 2006 and 2007 deficit was around £4 Billion and £8 Billion respectively.

The figure stood at around £10 Billion during the year 2010 which was only £2 Billion in the year 2009. The deficit has increased substantially compared to the figures of last year. During the year 2009, the exports of Germany were $1.2 trillion but the amount was much lower than the amount of last year which was $1.5 trillion. Germany is ranked as the third largest exporter in the world Economic Growth Both the countries have a well develop economy which has sustained good growth in the past few years.

The last couple of years have been quite testing for both the UK and Germany due to the economic downfall throughout the world and almost every country has struggled to maintain their economy. The UK had a growth rate of negative 0.6% as their economic growth declined as the inflation, unemployment rate and current account deficit increased proportionately. The first quarter to 2007 had a growth rate of around 1% which was cut down to 0.3% as the economy started facing the tremors of recession and the year 2008 started with GDP growth rate of 0.3%. In 2009, it faced the worst downturn as the economy sustained a negative growth of 2.

4% which started improving in the end of 2009 as the growth was 0.4% at the beginning of 2010. The mid of 2010 saw a boom as the growth rate reached 1.2%, the highest since 2006, but now has again gone negative as it stays at -0.6% (Trading Economics) Germany on the other hand was on track as it witnessed a growth rate of 0.4% in the 2011 quarter. The start of 2007 was quite the same for Germany as 0.3% growth was seen. The growth in Germany was down by 0.2% in the year 2008 but in the second quarter a sudden boom was seen as it reached 1.6%. As the year 2009 brought lot of distress for the economy of the world, Germany was no better and a negative growth rate of 2.

4% was observed which further worsened to negative 3.4% in the second quarter. In the year 2010, Germany was back on track as an average growth of 0.4% was seen which later reached 2.2% in the mid of 2010. (Trading Economics) OLIGOPOLY IN EUROPEAN CAR MARKET In the continent of Europe, the care market has always been a part of the oligopoly as the few of the car manufacturing giants have taken over the car market with respect to sales and manufacturing. Market share of the European brands Some of the various car brands that have maintained the market stand in Europe are Volkswagen, the French PSA, Renault, BMW, Nissan, Ford and Toyota etc.

These major companies have maintained a huge share in the car market of Europe, acquiring around 40% of the market share during the last few years. In the year 2010, the Volkswagen group was able to maintain a market share of over 21% which was around 4% less than their share in the year 2009. PSA and Renault were the other two companies which had a market share of over 10% with a share of 13.4% and 10.2% in the year 2010. (Suite 101) The demand and supply of cars has raised in the past few years which is why some companies that did not have a good market share, such as the Mitsubishi, Volvo and Kia have accessed the market but have not been able to grab a good share in the market as the car companies such as Ford, Fiat, BMW, Toyota and Nissan have maintained the trend of Oligopoly in the car market of Europe.

Price discrimination It has been seen that the price discrimination across the countries in the Europe follows from the differences that are systematic in the marginal operating cost or the differences that are systematic in markup cost which is the International price discrimination. International Saturation and Concentration It is observed that comparatively a large quantity of the firms is present in the car market of Europe which makes it obvious that there is comparative competition in the car market of Europe.

However, the market segmentation has lead to the consideration of the large firms of each country separately. When such an exercise is carried out, it is observed that in most of the European countries there are a very little existence of large firms. The concentration is high for countries such as Germany, UK, Italy and France etc. All the countries seem to have their domestic producers which have occupied the major area of their market domestically, such as Fiat in Italy, Renault and PSA in France and Volkswagen, Ford and GM in Germany.

Cost differences There cannot be a perfect competition as the car manufacturing firms are not the price taking firms due to the market saturation and the cost differences in the places of manufacturing of the brands. (Verboven) Due to the geographical segmentation, it can be observed that the car manufacturers charge a different markup in the various countries where the car is being manufactured which makes the market less perfect and the firms are not price taker firms which make it an Oligopoly model.

References Economy Watch. http://www.economywatch.com/world_economy/united-kingdom/. Index Mundi. http://www.indexmundi.com/germany/inflation_rate_%28consumer_prices%29.html. SGC. http://www.sgc.org.sg/bizinfo/business-with-germany/market-access/europes-largest-economy/. Suite 101. http://www.suite101.com/content/top-20-best-selling-car-manufacturers-and-brands-in-europe-2010-a334475. Trading Economics. http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=GBP. Trading Economics. http://www.

tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=DEM. Verboven, Frank. "International price discrimination in the European car market."